The data economy: the whys VI - Mixing atoms and bits

I wrote on the transformation from atoms to bits and then back to atoms pointing out that these transformations on the one hand change the economic landscape flanking the economy of atoms with the data economy, and on the other hand the transformations create value. It is nothing strange, transformation applied to the world of atoms create value (VAT - Value Added Tax...) so no surprise that transformation applied to bits create value. However, the rules are different, because atoms and bits have different characteristics and I pointed out the differences between the two from an economic point of view. These differences are also opening opportunities to new breeds of companies with much less legacy and inertia (although in the last post I pointed out the the world of bits requires heavy/costly infrastructures to operate and these areas are the turf of big global companies).

Let's consider now the interplay of the two world from the point of view of user experience and from the economic point of view.

In the last two years we have characterised the focus of EIT Digital strategy as leveraging the blended world resulting from the interplay of atoms and bits. Today these two worlds are separated from one another although the shift from one to the other has become so easy, and frequent, that in most situation we no longer pay attention and we tend to see the two present at the same time: they not just overlap, they blend.

You sit in a theatre and wonder what's the age of the actor. Without even thinking your hand goes to your smartphone, a few keystrokes and you have her age on the screen. Back on the way home you receive a tweet of a road blocked for an accident occurred just minutes ago and you re-route your homeward journey without giving a second thought. At home you share your experience at the theatre with family and friends that happen to be scattered in several continents, by showing them parts that are already available on YouTube, again in a seamless way, so seamless in fact that we no longer perceive it as abnormal. It is our blended life.

And yet this new world is a mixture of different economic forces, the ones involving atoms and the ones involving bits. You have paid to access the show at the theatre (atoms) but you don't feel like paying when looking at clips from YouTube, you paid for the gasoline for your car to take you home but you feel you did not pay for the information that resulted in a rerouting of your journey and so on.

It almost seem that the economy of bits, the data economy, is for free. But there is no economy in a free world, by definition any economy is about value exchange.

The key to understanding what is going on is that in the economy of atoms the relation between fruition and payment/cost is clear whilst in the economy of bit it can be so indirect that it may seem to be a free lunch.

That clip you saw on YouTube was paid every time you went to brush your teeth: YouTube makes money on advertisement and you as end customer end up paying for that advertisement when you buy a product. The toothpaste made the trick of providing you a free vision of a clip. However, the relation is so indirect (it might actually that somebody else is paying for your viewing the clip by buying the toothpaste) that you don't feel it.

From the market point of view these indirect models have changed the rules of the game. What used to be a valuable asset, the video content, is now becoming challenged by tons of content that is offered for free (most of YouTube content is produced by amateurs, in 30 days they upload on YouTube as much content that has been created by the three major US broadcasters in 30 years... see statistics). Notice that I am using YouTube as an example, but we could have taken Flickr, Instagram, FB, ...

The simplicity of access to bits in every moment and the effectiveness of the rendering of those bits into information is what makes blending a reality of our every day life.

This is going to move up one notch in the coming years with better access to augmented reality, where the world of bits is smeared on the world of atoms. This is now happening in small niches (like the app Word Lens by Quest Visual that has been acquired by Google).

An interesting example is THE Vision Of Infinite Dimension (see the clip), THE VOID, an initiative of an entrepreneur to create Augmented Reality amusement parks, the first one to open in 2016 in Salt Lake City. THE VOID will make use of advanced, but affordable, technologies that can track a body and its every movement, and provide visual, tactile, olfactive and sounds sensations augmenting the feeling of reality. A true pillar made of atoms is rendered as the bark of a gigantic tree and so on. The proponents claim people will be living the movie, rather than watching it.

This is clearly a niche application but over time it will percolate in our everyday experience bringing the blending of atoms and bits to new levels.

This will enable the interplay of even more companies and business, some rooted in the atoms economies others in the bit economies.

As I pointed out in the previous post in this series, the data economy requires the availability of infrastructures (for storage, access, processing) but small companies can well used virtualised infrastructures where the data economy rules apply. This is what we see happening.

We are also seeing something more: small companies living in the atoms economy are making use of the bits economy to drastically slash their cost, moving most of their processes onto virtual infrastructures (Cloud and more). This is also part of the blended world we are living in.